Blocked in its bid for neighboring Southwest Gas, Austin,TX-based Southern Union Co. focused on the East, picking upapproval from its board of directors and that of the Fall River GasCo., on a merger agreement.

The agreement calls for Southern Union to acquire Fall River Gas ina transaction valued at approximately $75 million, includingassumption of debt. This follows on the larger $500 millionacquisition of Pennsylvania Enterprises Inc., which is currently inprogress. (See Daily GPI, June 8)

In mid-September Fall River, a small LDC serving 47,000 customersin Southeast Massachusetts, said it had received a buyout offer at$23.50 a share and was taking the proposal under advisement. (SeeDaily GPI, Sept. 13) It did not revealthe purchaser’s name. Fall River put the value of the stocktransaction alone at $51.7 million. Just prior to the announcement thecompany’s stock had been hovering just over $20 a share.

Southern Union said the move strengthened its balance sheetwhile expanding its competitive position in the attractiveNortheast energy market. Upon completion of the two mergers,Southern Union will have a market capitalization of approximately$1 billion and serve nearly 1.3 million gas and electric customersin Massachusetts, Pennsylvania, Texas, Missouri and Florida.

Under the terms of the agreement, Fall River Gas shareholderswill receive $23.50 per Fall River Gas share in Southern Unioncommon stock or cash.

According to Southern Union President Peter Kelley, “Customerswill immediately experience the benefits of being part of a largercompany as Southern Union brings technology into the workplace toenhance customer service. Southern Union has adopted existingtechnology and is developing new products that will further enhanceservice and efficiencies.”

Fall River Gas Chairman and CEO Bradford Faxon said, “This is anopportunity for our shareholders to realize the full value of theirinvestment in Fall River Gas and have the opportunity to join aprogressive international energy company with a proven record inbuilding shareholder value.”

Fall River Gas will operate as a division of Southern Union andaccording to Kelley, no layoffs are anticipated as a result of thetransaction.

The transaction will require the approval of the holders oftwo-thirds of outstanding Fall River Gas shares, as well regulatorsin three states. Holders of 25% of outstanding Fall River Gasshares have committed their support for the merger into SouthernUnion.

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